Core Specialty’s Yosemite Re deal a rare E&S catastrophe bond

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The first catastrophe bond to be sponsored by insurance group Core Specialty is a rare excess and surplus (E&S) focused transaction, the company said as it hailed completion of its new $65 million Yosemite Re Ltd. (Series 2022-1) catastrophe bond alongside its reinsurance renewal.

core-specialty-starstoneAs we’ve been reporting since the first Yosemite Re cat bond was launched to investors on behalf of Core Specialty a month ago, the company secured a $65 million source of named storm and earthquake reinsurance protection from its first visit to the catastrophe bond market.

The Yosemite Re cat bond will protect Core Specialty-owned insurers under the StarStone brand to begin, but the company can also add other brand-name insurers to the deal’s reinsurance protection at future resets, should it choose to.

As a result, the initial ceding insurers for the Yosemite Re Ltd. catastrophe bond are StarStone National Insurance and StarStone Specialty Insurance, but Core Specialty can add its Lancer companies in future if it chooses.

StarStone specialises in writing excess and surplus (E&S) lines property insurance and this is the subject business covered under the Yosemite Re cat bond.

The deal was launched early in May with a $75 million or greater target for a multi-year source of collateralized catastrophe reinsurance protection against losses from named storms and earthquakes across the United States.

In the end, the Yosemite Re cat bond was finalised at $65 million in size, while the notes were priced at the top-end of their guidance, to pay investors a coupon of 9.75%.

In hailing the completion of the Yosemite Re cat bond deal, the company highlighted that, “This placement was not only Core Specialty’s first foray into the catastrophe bond market, but it also represents one of the only standalone E&S 144A catastrophe bond issuances to date.”

ILS investors have become increasingly comfortable with E&S property risks, with a significant amount of collateralized reinsurance capacity having backed E&S portfolios before.

But, in cat bond form this is a rarer occurrence, which reflects investors trust in Core Specialty and the StarStone brands underwriting.

Jeff Consolino, Core Specialty’s President and Chief Executive Officer, commented, “The Yosemite Re transaction marks another important step for Core Specialty. The cat bond not only further optimizes our risk transfer program, it also diversifies our existing panel of reinsurance capital providers.”

The Yosemite Re cat bond was the final element of Core Specialty’s property reinsurance program for 2022, which attaches at $50 million and exhausts at $570 million of coverage.

The program also features $495 million of catastrophe excess-of-loss reinsurance capacity secured across the program, an increase of $120 million over Core Specialty’s 2021 renewal.

The 2022 reinsurance tower, “Efficiently blends traditional, structured, ILS, and cat bond capacity,” Core Specialty said.

It features 26 reinsurers backing the reinsurance based component and an additional 16 backers of the cat bond placement, the company explained.

Including a Quota Share reinsurance arrangement and Per Risk placements, 34 reinsurers supported the 2022 renewal.

Consolino said, “We are thrilled to successfully complete this strategic transaction. We continue to build a market-leading property division and our robust reinsurance program will ultimately benefit our customers and distribution partners.”

E&S property books can be very attractive to ILS investors and it’s encouraging to see more of this risk coming into cat bond form, where previously facilities that brought ILS capital to back up E&S risks have largely been quota share and collateralized in nature.

Read all about this Yosemite Re Ltd. (Series 2022-1) catastrophe bond and every other cat bond deal issued in our extensive Artemis Deal Directory.

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